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Sustainability Report 2017

Sustainability Report

2017

About the Report

In its 11th edition, Vale’s Sustainability Report complies with the Global Reporting Initiative (GRI), Standards version, and its Mining and Metals Sector Supplement.

Its content also covers the guidelines and commitments related to the United Nations Global Compact, to the International Council on Mining and Metals (ICMM), and to the Sustainable Development Goals (SDGs). Additionally, it considers the 2030 Agenda, United Nations’ (UN) document that presents concreate measures to promote the sustainable development so we can reach a more viable world for everyone, using year 2030 as a horizon.

The achievements, difficulties, challenges and advancements were divided into five themes of critical importance - People, Planet, Prosperity, Peace, and Partnership -, the same ones that guide the SDGs and the 2030 Agenda. To those, we have added a sixth chapter (Purpose), which presents the way Vale organizes itself to play its role in those matters.

Mitigation, adaptation and resilience to climate changes and emission of greenhouse gases

Management of water resources

Biodiversity

Management of mineral waste

Management of social, enviromental and economics impacts

Incentive to scientific research, generation of knowleadge, professional qualification, and qualification of population

Legal and regulator management

Health and safety of the workforce and of the community

Engagement and relationship withstakeholders

Managementof bucesiness and operational risks

Report, materiality and SDGs

The Sustainability Report was organized based on Vale’s material subject (issues considered most relevant of the company’s stakeholders opinion), which resulted from the new review cycle of its materiality matrix. Guided by the GRI guidelines, Standards version, the process complied with the four essential principles to define its content: the context of sustainability, the inclusion of stakeholders, the materiality and completeness.

Both the material subject and the other subjects discussed in the report have been matched with each of the Sustainable Development Goals (SDGs) to make a broad analysis of how the company collaborates to implement them. Finally, a consistent evaluation was made regarding the correlation between the material subjects and the SDG, which lead to the prioritization of 11. Goals distributed in People, Planet, Prosperity, Peace and Partnership chapters, more directly related to Vale’s commitment to the sustainability and the generation of shared value.

Purpose

How Valebuilds value for society

The largest mining company in the Americas and one of the largest in the world, Vale’s purpose is transforming natural resources into prosperity and sustainable development through mining. This means working with the goal of generating economic return for shareholders and, at the same time, adopting best practices to environmental conservancy and social action.

Vale and Novo Mercado

In December 22, 2017, Vale completed the migration of its shares to Novo Mercado of B3 - Brasil, Bolsa, Balcão (stock exchange of São Paulo), which represents the alignment to the highest standards of corporate governance, management and transparency. In practice, Vale becomes a company with no controlling shareholder defined and its shareholding structure and capital become pulverized and diff use. With the corporate reorganization, minority shareholders gained more representation, conquering full voting rights and participation in the company’s major decisions. This change reduces uncertainties, increases transparency and confidence, generating value not only for investors, but for all stakeholders.

Presence in25countries of 5 continents

Return to the International Council on Mining and Metals (ICMM), which gathers 23 global companies of the sector and required its members to commit to the best operational principles and practices

142Plans of Relationship and Social Investment in Brazil, in 2017

People

Respect and dialogue

Respect for people is fundamental to building strong and lasting relationships with the public with which Vale is related. It is required to create collaborative environments, internally and externally, and for daily activities success. As one of the company’s principles, respect for people is demonstrated in the relationships that Vale builds with its employees, communities and stakeholders.

Distribution of own and third-part employees by region

Cases

Strengthening family agriculture to transform the life of Vila Ouro Verde

Leaving a legacy in the territory and supporting communities in their development and autonomy is also promoting sustainability. In the rural community of Vila Ouro Verde, which is located at the surroundings of the S11D Eliezer Batista Complex, in Canaã dos Carajás (PA), a project developed by the Relationship with Communities Area has helped to structure the income generation of 35 families that live in the land. The Strengthening of Family Farming with Support to Field Mechanization and Strengthening of Associativism and Cooperativism included the purchase of farming equipment and training the families in planting practices with the purpose of increasing productivity, soil conservation and environmental preservation.

Being a fruit of a lot of conversations and a diagnosis of the economic potential to define the strategy to support the families, the initiative, which materializes the precepts of Vale’s sustainable development policy, has perennial positive effects throughout the entire local production chain. It has promoted the productivity in the field, meaning more income for the farmer, an incentive for families to stay in the field, and more products for consumers.

With this project, which had the investment of US$ 146,7 thousands from Vale, local producers formed an association, which has reaped the following benefits:

Overall income with the project: US$ 29.8 thousand;

The community’s contribution to the project: US$ 14.1 thousand;

Reduction of 40% in the agricultural production cost (corn, manioc, rice, other grains) with the purchase of equipment (mechanized patrol);

Production diversification in 60% of the participants;

Increase of 48% of cultivated areas;

The collective sales of milk through the association caused profits to increase by 53% and milk prices to increase in up to 10%;

Diversification of 60% of the families’ source of income;

Courses on the management and storage of hazardous waste in agricultural activities;

Sustainable Handling: setting good agricultural practices with incentive to protect areas with fountainheads.

Include to Evolve - investment in the process of hiring and development of people with intellectual disabilities

Creating a culture of diversity and inclusion is one way of reinforcing the experience of our core values, "Acting Correctly". One of the behaviors associated with our value is respect for differences and inclusion of all. Moreover, Vale seeks to contribute to the ODS through various actions and projects, and such commitments are in its Sustainable Development Policy. The topic ‘people with disabilities’ appears in many parts of the ODS, including eradication of poverty, education, dignified jobs, reduction of inequalities, and sustainable cities and communities.

Having this mission in mind, a diagnosis of accessibility was conducted from January 2017 to January 2018 at the operational unit of the Ferrosos Sudeste Board (MG), in the PPE Management area, to better qualify our process of hiring people with intellectual disability. Vale is committed to complying with Law 8213/91, which provides for the proportion of PCD employees in company staff, 5%.

With the diagnosis, APAE Supported Employment was identified in the market and chosen as a partner, a social technology for integration/inclusion of people with disabilities in the market. It has on-the-job qualification strategies and offers the necessary support to carry out the job obligations.

At the second stage, four candidates participated in the Recruitment and Selection process for functions such as Administrative Assistant at the PPE Central. An awareness-raising lecture was also held for Vale employees, for the purpose of raising awareness about the types of intellectual disability and the limitations of each one, and giving tips of relationships with colleagues with special needs and maintaining a healthy and prejudice-free environment.

At the end of the selection process, in September 2017, two people were hired and, with that, we started the stage of specific qualification and monitoring of adaptation of new employees in their jobs, with excellent results, such as individual development. The team managers also went through tutoring, to better contribute to the integration of colleagues, with weekly monitoring of Apae-MG, which contributed to broaden empathy and tolerance internally. The pilot initiative is being disseminated to other areas. The investment with advisory for implementation of the project, during 12 months, was R$5 thousand per inserted user.

3,6million hours dedicated to the qualification of employees in the world

25,9 thousand people answered the survey on the perception of employees about the evolution of plans of action for improvements mentioned in the employee’s Global Survey

Planet

Responsible management of impacts

Vale’s environmental performance shows the commitment with the sustainability of the territories in which it operates. Investing financial, human and technological resources to mitigate and compensate the effects of its activities on the environment.

8.5thousand km² of protected areas, which is equivalent to 5,6 times the total area occupied by the operating units

55% of the eletricity consumed was self-producted

US$ 487.3 million invested in environmental protection and conservation

100% iron ore dams audited with a condition of attested stability

Cases

Brazil has been suffering from a water crisis for the last few years that directly affects nature conservation, the agricultural and industrial production and daily life for its towns’ residents. Forests’ vital importance in protecting rivers and springs that supply cities is widely recognized, for they filter out pollutants, stabilize the weather and water flows, and reduce erosion, sedimentation, flooding and drought. To help solve the water shortage problem, Vale’s Natural Reserve (VNR) team sought a natural solution – they developed the Pau Atravessado River Forest Restoration Project to protect water sources and riparian forests in Espírito Santo state (Brazil).

RNV established a priority to recover ecological systems using native vegetation along the microbasin of the Atravessadp river that feeds its reservoir. Its creeks are located upstream in the Sooretama (Espírito Santo State) municipality and have being suffering from low water availability due to degraded, dammed water used for farming. A highly specialized forest restoration team with seven members (biologists, engineers and field technicians) was responsible for deploying the project.

The first step was to map the region’s dams and creeks by georeferencing, and to conduct field trips to register rural property owners in the vicinities of the 97 existing dams. Thirty-seven springs were found and defined as priority restoration areas.

With the data survey essential for water monitoring, 23 specific projects were developed for these properties, including a supply of native plant and tree seedlings from the Atlantic Rainforest and technical support for the rural property owners.

Until December 2017, 17 subprojects were implemented in partnership with rural landowners committed to restore the riparian forests. The subprojects will be monitored twice a year for three.

New ships reduce greenhouse gas emissions

Fuel consumption and the reduction of greenhouse gas (GHG) emissions receive Vale's special attention in the maritime transportation of its cargoes, mainly in the Brazil-China route.

The company currently uses the world's most efficient class of ships in terms of energy consumption and emission of greenhouse gases, taking into account the Energy Efficiency Design Index (EEDI) of the International Maritime Organization (IMO), which collects data from almost 3,000 ships.

Vale's pioneering project, first-generation VLOCs, also called Valemaxes, have been in operation since 2011 and emit 30% less CO2 compared to the standard iron ore shipping vessels, known as capesizes. Built on Vale's initiative, the second generation of super-carriers, with capacity for 400 thousand tons, reduces CO² emissions by approximately 20% in relation to the first generation, and by at least 41% the emissions in relation to capesize vessels of 2011.

In January 2018, Yuan He Hai was delivered, the first of thirty-three new second-generation VLOCs. The construction of the vessels started in 2016, and these shall be delivered to the shipowners by 2019.

Review of the model of operation and formation of trains

Improving energy efficiency and pollutant emission reduction indexes is one of the daily focuses of all areas of a railway. Seeking gains in productivity and cost, and reducing its impacts, the team of the Vitoria Minas Railroad (EFVM) organized to restructure the railroad's operational model to reduce diesel consumption in the transportation of ore to the Port of Tubarão, in Espirito Santo.

The job did not require any extra investment. Without the use of new technologies or the purchase of assets, the purpose of the project was to restructure the operational model of the railroad, reviewing customer service processes in a regular and leveled manner, focusing on a more economic operation and formations of larger and more economical trains.

Some innovations in process:

Adoption of the pulled production, that is, without remaining resources in the yards, in the circulation mesh and at the terminals. Only the expected to be unloaded was loaded.

Hourly grids of train departures with greater predictability and autonomy for the yards, whose teams started to define the best formation of wagons for each timetable, depending on the demand.

Creation of more economical driving procedures, which often undergo reviews, with new adjustments suggested by the drivers, which further increases efficiency gains.

Review of standard trains for formations of increasingly larger and more economical trains, using technologies already available. This has reduced the number of trains in the mesh and the number of stops, and also the interferences in the routines of the communities along the railroad.

These initiatives have led to an increase in the number of trains with 252 and 336 wagons, the largest on the railroad, from 40% to 70% of the large-scale trains in circulation. The change allowed a reduction of 8 trains per day circulating in the EFVM.

In the last 5 years, the railroad has improved its efficiency level from 1.985 L/kTKB to 1.599 L/kTKB (total liters divided by gross ton times the distance traveled). An improvement of 19.5% of the indicator, which represents annual consumption savings of around 44 million liters of diesel.

Prosperity

Commitment to social and environmental development

One of Vale´s commitments, reflected in its mission, is to create value for its shareholders and for society. This pledge is guided by the search for increasingly more sustainable production, focus on world-class assets, and by policies and codes that aim to ensure the company's procedures are in accordance with the highest ethical standards, transparent management, and legal compliance in the countries where Vale operates.

Vale's performance in 2017

EBITDA

Total:

US$ 15.3 bi

28%

Investiments

US$ 3.8 bi

26%

EBITDA coal

US$ 330 mi

711%

EBITDA Margin ferrous minerals

US$ 37,9/t

24%

Net earnings

US$ 5.5 bi

38,3%

Net debt

US$ 18.1 bi

28%

Cases

Agir Program: Expressive results in the generation of income through social impact businesses

Vale believes that contributing to projects that generate work and income is one of the best ways to build a legacy for and with the most vulnerable people and communities close to its operations. Created by the Vale Foundation in 2013 and present in 20 municipalities, the Agir program is a social technology focused on the incubation and acceleration of social businesses – primarily family and collective - offering qualification, technical and managerial advisory, mentoring, direct investment, and monitoring of projects so that they thrive in an autonomous and sustainable manner.

With its improvement, Agir has become more than a program, a methodology that contributes to local development and that can be replicated by public, private and third-sector entities.

The implementation of Agir takes place at three phases: Prospecting, in which local entrepreneurs are mapped, trained in integrated business management and mentoring for development of their business plans; Incubation/Acceleration, with a personalized work business to business, promoting an effective contribution in the axes of financial management, production, marketing, governance, people, in addition to direct capital investment in equipment and infrastructure; and Monitoring, which consists of monitoring established businesses with help from the project.

With more than 1000 entrepreneurs benefited and 80 incubated or accelerated businesses, the program has histories of success in municipalities like Itabira (MG), which benefits more than 130 local entrepreneurs, mainly in the development of family agriculture, through the improvement of the most sustainable production techniques, and the creation of traveling fair; and Canaã dos Carajás (PA), with emphasis on support to a cooperative of recyclable waste pickers, which increased its revenues by more than 300% and helped to prevent more than 100 tons of waste from being sent to a public landfill in 2017.

On the Carajás Railroad (EFC, in Portuguese), the program focused on the development of alternatives of income for people, especially women, who worked in the informal food trade on the margins of the EFC. Products were sold through the windows of the compositions, at each station, and became unfeasible with the air conditioning of the new passenger train, which keeps the windows closed.

To prevent those people from losing their livelihood, the Agir program worked preventively and, from 2014 to 2017, worked with this public in the structuring of business. Today, there are 22 social businesses in operation with 137 engaged project owners. For this initiative, the Vale Foundation won the first place in the 2017 edition of the Human Being Award, organized by the Brazilian Association of Human Resources.

US$ 5.5billion an increase of more than 38,3% in comparison with 2016

243 companies in Brazil qualified by the Suppliers’ Development Programs

Peace

Grow and evolve with the community

Vale works to establish responsible and sustainable relationships with communities, suppliers, partners and all of its stakeholders in the territories where it operates. Transparently managing issues that can generate potential conflicts contributes to the company’s ability to achieve or maintain a License to Operate. This brings Vale legitimate social acceptance and the approval of other interested parties, especially its local communities

68.3 thousand people mobilized in 19 countries on Reflexion Day

237 health actions with 341.8 thousand employees, third parties and members of communities that surround the operations

Cases

Sudbury Alerts prevent emergencies in Canada

With a view to managing risks, the impacts it can cause in areas surrounding its operations, and its community relations, in early 2017 Vale funded and implemented a public mass notification service for the City of Greater Sudbury in Ontario, Canada called Sudbury Alerts. This alert system is particularly relevant to operations there because of the scale and complexity of the operations close to the city. Vale maintains five operating mines, one mill, one smelter, one nickel refinery, and one of the world’s largest tailings facilities in the region.

As there are inherent and associated risks arising from its operations, management of these risks aims at a zero rate of adverse impacts on people and the environment in this context, Vale and the City’s emergency preparedness officials identified a communication gap regarding mass notification of emergencies. Sudbury Alerts was created to fill that gap by instantaneously sending messages about potential emergency situations, not only linked to Vale, but to any threat to the public interest.

The system notifies residents about potential hazards or situations that may pose an imminent threat to their safety, and provides instructions on how the population should act. The City, which has a population of 150 thousand inhabitants, grew around Vale’s facilities over more than 100 years of operations. Sudbury Alerts was launched with 60,000 subscribed phones from local residents wishing to receive automatic notifications. A comprehensive advertising campaign was executed targeting residents to refine how they received notifications through the service with the slogan, “Sign up, get notified and be prepared.”

Residents were able to register telephone numbers and additional means of contact such as cell phones, text messages, faxes or emails. They could also specify places where they prefer to receive emergency notifications, such as at home, at work, at their children’s school, among others. The service was extensively communicated to the population through advertisements in local newspapers, radio, television and social media.

Vale also organized an open event during the Emergency Preparedness Week to encourage residents to sign up and learn how Vale mitigates risks associated with its operations in a responsible manner.

One of the main negative impacts of the pelletizing stage and the later storage of iron ore in Vale’s yards and ports is the dispersion of particles into the atmosphere. Known as black dust, this material is lifted off piles of ore by the wind and may reach the surrounding operations and nearby cities. In a continuous quest to minimize these impacts, Vale invests in developing efficient and eco-friendly technologies.

An initiative from Oman has been showing good results: they use a biodegradable solution made from cellulose fibers, which has a very particular feature: it forms a white crust over the ore piles, which can be 19 meters high. This material and technology were developed through a partnership with the Dutch company DBD.

Oman has very dry weather and temperatures that reach 50°C. To reduce dust dispersion in the air caused by wind gusts, the piles used to be wet down with recycled water. In addition to the low efficiency, because the heat causes the pile to dry quickly, the water would cause these iron particles to flow into the network of effluents, increasing the environmental risk.

Vale invested US$ 245 thousand to build a mixing and distribution station of the material – named Dustcruster – which is diluted in water, stored in tanks, and used in an automatized way, without risks to the operators. The solution goes through a system of pipes in the tanks to the machines installed in the yard, which have a device to trigger pulverization during operational windows. Vale investedUS$ 240 thousand in the cellulose-based material.

In addition to facilitating compliance with legal obligations related to the rate of particulate material emission in the air and the management of operational and environmental risks, the use of the Dustcruster, implemented as of January 2017, brought the following benefits:

Improvement of the rates of TSP (total suspended particles) due to the use of the product. In November 2017, the emission rate of TSP was lower than 5 kg/h during 83% of the time analyzed; the previous reference data of dust containment with water maintained this rate only 67% of the time.

Hard crust, unbreakable by the wind gusts, with high resistance to rain water or to water sprinklers.

White color, which facilitates the tracking of its performance in the application by visual inspection.

Lasts over a month after it is applied.

Eco-friendly (natural biodegradable cellulose).

Reapplication was tested in a pilot project in Brazil’s Tubarão (ES) unit.

Partnership

Collaboration on the creation of shared value

Vale works to generate prosperity, respecting people and the environment. Within its global performance, it seeks to collaborate with society and the communities where it operates, often through partnerships with international and regional organizations and institutions, governments, universities, NGOs and other civil society groups. The company seeks to participate in forums on the subject, actively contributing to discussions on themes such as the environment, commerce, energy, sustainable development and transparency, among others.

Cases

Ocular screening and cataract surgery program in Dompu, Indonesia

In May and September 2017, guided by the Local Development Catalyst pillar of the company’s Sustainable Development Policy, Vale promoted two campaigns to identify and address vision problems for the population of Hu’u district and the Dompu municipality, which are close to Vale’s Indonesian operation.

The project was structured to take into account a diagnosis made from the local community relationship-building and social development program, which identified a large gap in the company’s offer of public health programs and a lack of availability of eye examinations and treatments, causing limitations to life, work and income generation for a large part of the population.

The John Fawcett Foundation in Bali was chosen as the project partner because it has a mobile surgical unit and a trained team of ophthalmologists, nurses and eye specialists. It was necessary to take the treatment to distant communities to expand access to services. The investment in the initiative was US$80,000.

In addition to directly benefiting members of the affected communities, the program built greater awareness of Vale’s commitment to economic and community development in the Dompu municipality and Hu’u district. Vale’s Indonesian operations include a nickel mine (Sorowako), three hydroelectric dams and a port for production outflow, as well as a mineral exploration center that aims to map copper deposits in the region and a professional training center that serves 42 villages impacted by the mining operations.

Sustainable Fishing on the Amazonian Coast

The inhabitants of the Amazonian coast benefit from different ecosystems - the sea, rivers and streams and mangroves - from which they derive the main source of income. In this region, the Vale Fund maintains an important partnership with Unesco, focusing on interaction to develop and strengthen sustainable production chains for local fishing.

Started in 2014, the Sustainable Fisheries project on the Amazonian Coast had several advances in 2017. The project supports the sustainable development and strengthening of the production chains of the mangrove uçá crab and palaemonidae, piticaia and branco shrimp, in the states of Amapá, Pará and Maranhão, aiming to provide to local fishermen a fair access to markets and sustainable use of resources.

Benefited by the project are 30 communities in 10 municipalities on the Amazonian Coast, in a geographic area where almost 10,000 families live. The project acts directly with communities of local fishermen and artisanal gatherers, involving diverse social actors (young people and women) and stakeholders involved in fish value chains (producers, sellers, traders, buyers, companies and other entities). In addition, it acts with public managers in the three spheres of government, and NGOs, cooperatives, colonies, unions, universities and research institutes.

Among the main results found were:

Two diagnostic studies with qualitative and quantitative research to guide the lines of work and support productive fishing chains and communities (socio-cultural, economic and environmental diagnosis and the diagnosis of value chains).

Workshops in all communities served by the project, to share and validate the results presented by the diagnoses.

Annual meetings with all project partners.

27 workshops of youth leaders, involving about 300 young people in the three states.

22 workshops for technical training, strengthening the community and the application of low-cost social technologies, directly and indirectly, benefiting more than 800 people, including fishermen, families and communities.

Coordinated institutional partnerships (44 partners including public and private sector entities, universities, educational and research institutions, NGOs and community associations).

67% of the operations have engagement plans with stakeholders and 74% count with committees or groups of social dialogue

US$ 14million invested by Fundação Vale in 52 projects in 65 cities

Out of the total ofsocial expenditures in 2017:US$ 69.3 million invested in infrastructure US$ 35.6 million invested in services

Fundação Renova

Dialog and transparency to remedy the impacts

Vale, together with BHP Billiton and Samarco, maintains Fundação Renova, created with the purpose of managing and executing programs to repair and compensate areas and communities affected by the collapse of Fundão Dam, in Mariana, Minas Gerais, in November 5, 2015.

In one year of activities, in August 2017, the Foundation presented tangible results in relation to the commitments undertook under the Settlement and Consent Decree (TTAC, acronym in portuguese) signed by Samarco, its shareholders (Vale and BHP Billiton Brasil), Federal Government, government of the states of Minas Gerais and Espírito Santo, and other Brazilian governmental authorities.

Among the accomplishments of the first year of activities, its must be highlighted the US$ 858 million already destined to the recovery process, US$ 160 million paid as damages, 101 streams recovered, more than 500 headwaters fenced, 2.3 thousand sacred items retrieved and conserved, 47 thousand hectares under forest restoration process, more than 23 thousand registrations of people affected, and approximately 700 infrastructure works completed, among other relevant numbers.

The Foundation’s work happens by means of programs fully funded by its funding entities. Vale, as subsidiary funding entity, currently appoints three members for the Trustee Council and their respective alternates.

Fundação Renova’s activities comply with principles of transparency, and responsible and effective performance of the programs, which include public participation and constant surveillance by the government.